Question 1

What is economic surplus? When is economic surplus at a maximum?

Accepted Answer

Economic surplus is sum of con

Question 2

Figure 4-7  
-Refer to Table 4-5.An agricultural price floor is a price that the government guarantees farmers will receive for a particular crop.Suppose the federal government sets a price floor for corn at $12 per bushel.
a.What is the amount of shortage or surplus in the corn market as result of the price floor?
b.If the government agrees to purchase any surplus output at $12,how much will it cost the government?
c.If the government buys all of the farmers' output at the floor price,how many bushels of corn will it have to purchase and how much will it cost the government?
d.Suppose the government buys up all of the farmers' output at the floor price and then sells the output to consumers at whatever price it can get.Under this scheme,what is the price at which the government will be able to sell off all of the output it had purchased from farmers? What is the revenue received from the government's sale?
e.In this problem we have considered two government schemes: (1)a price floor is established and the government purchases any excess output and (2)the government buys all the farmers' output at the floor price and resells at whatever price it can get.Which scheme will taxpayers prefer?
f.Consider again the two schemes.Which scheme will the farmers prefer?
g.Consider again the two schemes.Which scheme will corn buyers prefer?

Accepted Answer

a.10,000 surplus.
b.$12 × 10,000 = $120,

Question 3

Figure 4-3   Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40S1U1B1 S1U1B0in order to raise the price to $18.
-Refer to Figure 4-3.What is the value of the deadweight loss at the equilibrium price of $15?

Accepted Answer

A)  $0 
B)  $40 
C)  $60 
D)  $100 
A)  $0 
B)  $40 
C)  $60 
D)  $100

Question 4

Suppose that in Canada the government places a $1,500 tax on the buyers of new snowmobiles.After the purchase of a new snowmobile,a buyer must pay the government $1,500.How would the imposition of the tax on buyers be illustrated in a graph?

Accepted Answer

A)  The tax will shift the supply curve to the left by $1,500. 
B)  The tax will shift the demand curve to the right by $1,500. 
C)  The tax will shift both the demand and supply curve to the right by $1,500. 
D)  The tax will shift the demand curve to the left by $1,500. 
A)  The tax will shift the supply curve to the left by $1,500. 
B)  The tax will shift the demand curve to the right by $1,500. 
C)  The tax will shift both the demand and supply curve to the right by $1,500. 
D)  The tax will shift the demand curve to the left by $1,500.

Question 5

Table 4-4
   Table 4-4 shows the demand and supply schedules for labor market in the city of Pixley.
-Refer to Table 4-4.What is the equilibrium hourly wage (W*)and the equilibrium quantity of labor (Q*)?

Accepted Answer

A)  W* = $10.50; Q* = 590,000 
B)  W* = $11.50; Q* = 570,000 
C)  W* = $9.50; Q* = 570,000 
D)  W* = $10.50; Q* = 1,200,000 
A)  W* = $10.50; Q* = 590,000 
B)  W* = $11.50; Q* = 570,000 
C)  W* = $9.50; Q* = 570,000 
D)  W* = $10.50; Q* = 1,200,000

Question 6

The total amount of consumer surplus in a market is equal to the area below the demand curve.

Accepted Answer

A) True 
 B)False

Question 7

Table 4-2
  
-Refer to Table 4-2.The table above lists the highest prices five consumers are willing to pay for a theater ticket.If the price of one ticket rises from $10 to $19

Accepted Answer

A)  only three tickets will be sold. 
B)  consumer surplus decreases from $31 to $6. 
C)  consumer surplus increases from $44 to $71. 
D)  no one will buy a ticket. 
A)  only three tickets will be sold. 
B)  consumer surplus decreases from $31 to $6. 
C)  consumer surplus increases from $44 to $71. 
D)  no one will buy a ticket.

Question 8

Figure 4-4  
-Refer to Figure 4-4.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

Accepted Answer

A)  If the price of pecans is $3 the output will be economically efficient but there will be a deadweight loss. 
B)  If the price of pecans is $9 consumers will purchase more than the economically efficient output. 
C)  Both 4,000 pounds and 12,000 pounds are economically inefficient rates of output. 
D)  If the price of pecans is $3 producers will sell 12,000 pounds of pecans but this output will be economically inefficient. 
A)  If the price of pecans is $3 the output will be economically efficient but there will be a deadweight loss. 
B)  If the price of pecans is $9 consumers will purchase more than the economically efficient output. 
C)  Both 4,000 pounds and 12,000 pounds are economically inefficient rates of output. 
D)  If the price of pecans is $3 producers will sell 12,000 pounds of pecans but this output will be economically inefficient.

Question 9

Figure 4-5   Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month.
-Refer to Figure 4-5.What is the value of consumer surplus after the imposition of the ceiling?

Accepted Answer

A)  $120,000 
B)  $230,000 
C)  $270,000 
D)  $430,000 
A)  $120,000 
B)  $230,000 
C)  $270,000 
D)  $430,000

Question 10

Figure 4-1   Figure 4-1 shows Arnold's demand curve for burritos.
-Refer to Figure 4-1.If the market price is $2.00,what is the consumer surplus on the second burrito?

Accepted Answer

A)  $0 
B)  $1.00 
C)  $2.00 
D)  $4.50 
A)  $0 
B)  $1.00 
C)  $2.00 
D)  $4.50

Question 11

Price ceilings are illegal in the United States.

Accepted Answer

A) True 
 B)False

Question 12

Table 4-6
  
-Refer to Table 4-6.The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick.The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units.What is the value of producer surplus?

Accepted Answer

A)  $100 thousand 
B)  $200 thousand 
C)  $600 thousand 
D)  $800 thousand 
A)  $100 thousand 
B)  $200 thousand 
C)  $600 thousand 
D)  $800 thousand

Question 13

Figure 4-6   Figure 4-6 shows the demand and supply curves for the almond market. The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at PS1U1B1fS1U1B0.
-Refer to Figure 4-6.What area represents consumer surplus after the imposition of the price floor?

Accepted Answer

A)  A + B + E 
B)  A + B 
C)  A + B + E + F 
D)  A 
A)  A + B + E 
B)  A + B 
C)  A + B + E + F 
D)  A

Question 14

Marginal cost is

Accepted Answer

A)  the total cost of producing one unit of a good or service. 
B)  the average cost of producing a good or service. 
C)  the difference between the lowest price a firm would have been willing to accept and the price it actually receives. 
D)  the additional cost to a firm of producing one more unit of a good or service. 
A)  the total cost of producing one unit of a good or service. 
B)  the average cost of producing a good or service. 
C)  the difference between the lowest price a firm would have been willing to accept and the price it actually receives. 
D)  the additional cost to a firm of producing one more unit of a good or service.

Question 15

The graph below represents the market for lychee nuts.The equilibrium price is $7.00 per bushel,but the market price is $5.00 per bushel.Identify the areas representing consumer surplus,producer surplus,and deadweight loss at the equilibrium price of $7.00 and at the market price of $5.00.

Accepted Answer

At the equilibrium price of $7.00:
Consu

Question 16

Figure 4-1   Figure 4-1 shows Arnold's demand curve for burritos.
-Refer to Figure 4-1.Arnold's marginal benefit from consuming the second burrito is

Accepted Answer

A)  $1.00. 
B)  $1.50. 
C)  $2.00. 
D)  $4.50. 
A)  $1.00. 
B)  $1.50. 
C)  $2.00. 
D)  $4.50.

Question 17

Frieda is at her local florist to buy a dozen roses.She is willing to pay $75 for the roses,and buys them for $75.Frieda's consumer surplus from the purchase is

Accepted Answer

A)  $150. 
B)  $75. 
C)  $37.50. 
D)  $0. 
A)  $150. 
B)  $75. 
C)  $37.50. 
D)  $0.

Question 18

What is producer surplus? What does producer surplus measure?

Accepted Answer

Producer surplus is the difference betwe

Question 19

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.

Accepted Answer

A)  Marginal cost 
B)  Producer atrophy 
C)  Deadweight loss 
D)  Economic shortage 
A)  Marginal cost 
B)  Producer atrophy 
C)  Deadweight loss 
D)  Economic shortage

Question 20

Figure 4-4  
-Refer to Figure 4-4.The figure above represents the market for pecans.Assume that this is a competitive market.If 4,000 pounds of pecans are sold

Accepted Answer

A)  the deadweight loss is equal to $12,000. 
B)  consumer surplus equals zero. 
C)  the marginal benefit of each of the 4,000 pounds of pecans equals $3. 
D)  marginal benefit is equal to marginal cost. 
A)  the deadweight loss is equal to $12,000. 
B)  consumer surplus equals zero. 
C)  the marginal benefit of each of the 4,000 pounds of pecans equals $3. 
D)  marginal benefit is equal to marginal cost.

What is economic surplus? When is economic surplus at a maximum?

Suppose that in Canada the government places a $1,500 tax on the buyers of new snowmobiles.After the purchase of a new snowmobile,a buyer must pay the government $1,500.How would the imposition of the tax on buyers be illustrated in a graph?

Table 4-4 Table 4-4 shows the demand and supply schedules for labor market in the city of Pixley. -Refer to Table 4-4.What is the equilibrium hourly wage (W)and the equilibrium quantity of labor (Q)?

The total amount of consumer surplus in a market is equal to the area below the demand curve.

Table 4-2 -Refer to Table 4-2.The table above lists the highest prices five consumers are willing to pay for a theater ticket.If the price of one ticket rises from $10 to $19

Figure 4-4 -Refer to Figure 4-4.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

Figure 4-5 Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-5.What is the value of consumer surplus after the imposition of the ceiling?

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.If the market price is $2.00,what is the consumer surplus on the second burrito?

Price ceilings are illegal in the United States.

Table 4-6 -Refer to Table 4-6.The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick.The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units.What is the value of producer surplus?

Marginal cost is

The graph below represents the market for lychee nuts.The equilibrium price is $7.00 per bushel,but the market price is $5.00 per bushel.Identify the areas representing consumer surplus,producer surplus,and deadweight loss at the equilibrium price of $7.00 and at the market price of $5.00.

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.Arnold's marginal benefit from consuming the second burrito is

Frieda is at her local florist to buy a dozen roses.She is willing to pay $75 for the roses,and buys them for $75.Frieda's consumer surplus from the purchase is

What is producer surplus? What does producer surplus measure?

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.

Figure 4-4 -Refer to Figure 4-4.The figure above represents the market for pecans.Assume that this is a competitive market.If 4,000 pounds of pecans are sold

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice,taxes,and the Distribution of Income

Filters

Exam 4: Economic Efficiency, government Price Setting, and Taxes

What is economic surplus? When is economic surplus at a maximum?

Suppose that in Canada the government places a $1,500 tax on the buyers of new snowmobiles.After the purchase of a new snowmobile,a buyer must pay the government $1,500.How would the imposition of the tax on buyers be illustrated in a graph?

Table 4-4 Table 4-4 shows the demand and supply schedules for labor market in the city of Pixley. -Refer to Table 4-4.What is the equilibrium hourly wage (W*)and the equilibrium quantity of labor (Q*)?

The total amount of consumer surplus in a market is equal to the area below the demand curve.

Table 4-2 -Refer to Table 4-2.The table above lists the highest prices five consumers are willing to pay for a theater ticket.If the price of one ticket rises from $10 to $19

Figure 4-4 -Refer to Figure 4-4.The figure above represents the market for pecans.Assume that this is a competitive market.Which of the following is true?

Figure 4-5 Figure 4-5 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month. -Refer to Figure 4-5.What is the value of consumer surplus after the imposition of the ceiling?

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.If the market price is $2.00,what is the consumer surplus on the second burrito?

Price ceilings are illegal in the United States.

Table 4-6 -Refer to Table 4-6.The equations above describe the demand and supply for Chef Ernie's Sushi-on-a-Stick.The equilibrium price and quantity for Chef Ernie's sushi are $60 and 20 thousand units.What is the value of producer surplus?

Marginal cost is

The graph below represents the market for lychee nuts.The equilibrium price is $7.00 per bushel,but the market price is $5.00 per bushel.Identify the areas representing consumer surplus,producer surplus,and deadweight loss at the equilibrium price of $7.00 and at the market price of $5.00.

Figure 4-1 Figure 4-1 shows Arnold's demand curve for burritos. -Refer to Figure 4-1.Arnold's marginal benefit from consuming the second burrito is

Frieda is at her local florist to buy a dozen roses.She is willing to pay $75 for the roses,and buys them for $75.Frieda's consumer surplus from the purchase is

What is producer surplus? What does producer surplus measure?

________ refers to the reduction in economic surplus resulting from not being in competitive equilibrium.

Figure 4-4 -Refer to Figure 4-4.The figure above represents the market for pecans.Assume that this is a competitive market.If 4,000 pounds of pecans are sold

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice,taxes,and the Distribution of Income

Filters

Table 4-4 Table 4-4 shows the demand and supply schedules for labor market in the city of Pixley. -Refer to Table 4-4.What is the equilibrium hourly wage (W)and the equilibrium quantity of labor (Q)?